Shareholders in Lloyds Banking Group approved the world's largest ever rights issue yesterday.

The troubled bank received the votes it needed to raise £13.5billion of new capital so it can avoid the Government's Asset Protection Scheme (APS).

The Lloyds board, including chairman Win Bischoff and chief executive Eric Daniels, told shareholders in Birmingham the rights issue was a "superior alternative" to the APS and there was "excellent" earning potential in the medium and long term.

It has priced the shares at 37 pence - a 60 per cent discount to make the rights issue more attractive to wary investors.

The rights issue forms part of a £22.5bn refinancing drive to repair Lloyds balance sheet after suffering heavy losses from its merger with HBOS.

The Government, currently Lloyds Groups' largest shareholder with a 43 per cent, had already given its backing to the rights issue.

Lloyds' 2.8 million small shareholders were asked for a second time in a year to support a rights issue having already raised £4bn in May.

Earlier this week it emerged Lloyds had accepted a £25.4bn loan from the Bank of England (BoE) last August.

Royal Bank of Scotland also received £36.6bn from the BoE to stave off a stock market run, which could have severely damaged the UK banking sector. The Banking Act 2009, which was introduced after the run on Northern Rock led to the loss of the majority of its retail funding, made it possible for the central bank to keep secret funding assistance in cases where financial stability may be put at risk.

Chancellor Alistair Darling was forced to make an emergency statement to Parliament this week to defend the secret loans made to RBS and HBOS.

Lloyds was in the process of buying Bank of Scotland when the loans were paid, though shareholders asked to back the merger were not aware of the agreement.

Darling said disclosure or leak of the operations would have seriously jeopardised the financial stability of the entire banking sector.

The loans were repaid in full by January this year at no cost to the taxpayer.

The long running enquiry into billions of pounds of overdraft charges also came to a conclusion with victory for the banking sector with the Supreme Court ruling in their favour. It said section 6.2 of the UnfairTerms in Consumer Contracts Regulations was out of bounds in the case. RBS chief executive Stephen Hester defended bank charges when he faced the Holyrood Banking inquiry this week.

He said:"We should understand there is not a free lunch here, and that banks have certain costs of doing business and if you don't get paid those costs in one way then you have to find them in another way."

Hester, pictured left, told the Holyrood enquiry RBS remains committed to Scotland, and hinted the country had now seen the worst of the job losses.